Business confidence high now, inflation easing

Dive Brief: Confidence among small businesses hit a post-pandemic high in recent weeks as fears of recession waned, the U.S. Chamber of Commerce and MetLife found in a quarterly survey. Sixty-six percent of small businesses said they are in good financial health and 72% report solid cash flow, according to survey results that bode well for the economy. Small businesses generate about 44% of gross domestic product, nearly half of private sector workers and, from 1998 through 2021, created 63% of net new jobs, according to the Small Business Administration. “Main Street employers are showing remarkable resiliency in the face of high inflation and a shortage of workers,” Tom Sullivan, the U.S. Chamber’s vice president of small business policy, said in a statement. “With fears of a recession likely in the rearview mirror and inflation starting to ease, small businesses owners are feeling a lot better than they were a year ago.” Dive Insight: Several private- and public-sector economists have marked up their forecasts for economic growth in recent weeks. Moody’s Analytics on Thursday forecast GDP will grow 2.1% this year and 1.4% in 2024 — both 0.1 percentage point higher than August projections. “The U.S. economy continues to show significant resilience,” Moody’s said in a research note. “Economic data for the third quarter have been surprisingly strong,” Moody’s said, noting robust consumer spending and progress by the Federal Reserve in slowing inflation without quashing the expansion. CEOs also project 2.1% economic growth this year, an increase from 1.5% in a second quarter survey, the Business Roundtable found in a Q3 survey of 143 chief executives. The Atlanta Fed forecast on Tuesday that the economy during Q3 will grow at a 4.9% annual rate, a one percentage point increase from its Aug. 1 estimate. The following day the Fed released median projections showing that central bank officials expect GDP to increase 2.1% this year and 1.5% in 2024. In June, as Fed economists abandoned a recession forecast, central bank officials forecast just 1% expansion for 2023 and 1.1% growth for next year. “The economy has remained strong as the FOMC [Federal Open Market Committee] has tightened monetary policy,” Fed Governor Michelle Bowman said in a speech Friday, noting that “real gross domestic product has been growing at a solid pace. “Consumer spending has been robust, and the housing sector appears to be continuing to rebound,” she said. “The most recent employment report showed a labor market with solid job gains.” The Fed, in order to curb inflation to its 2% goal, will probably need to push up the federal funds rate from its current range of 5.25% to 5.5%, Bowman said. “Further policy tightening will be needed to bring inflation down in a sustainable and timely manner,” she predicted.